The Innovation Myth

The other day my daughter asked me an unexpected question: “What is innovation?” How can we understand this word so often repeated by Russia’s politicians and economists?

The innovation economy that they are talking about does not offer solutions to the problems that the country faces. It does nothing for overcoming the environmental crisis, for freeing people from exploitation and alienation, easing the burden of the working class or for promoting the democratization of social relations. What’s more, nowhere is it written that something “new” will necessarily satisfy a pre-existing, unfulfilled demand. Once that new practice or product ceases to be a surprise or something unexpected, it will no longer be a newsmaker and will lose its ability to spur the creation of a new market.

There is also no law proving that innovation is necessarily beneficial to society or to consumers. Subprime mortgages are a good example. First introduced to the public as an innovative banking practice, their widespread use helped trigger the global financial crisis. What’s more, innovations are not always new. Sometimes they are nothing but the reworking of an old idea, method or technology that has been forgotten or has fallen out of fashion. Again, the subprime is a case in point. It is essentially a financial scheme dreamed up in the 15th century by two Englishmen —soldier Sir John Fastolf and businessman Richard Whittington. After the Battle of Agincourt, the English took a great many French aristocrats prisoner and expected large ransom payments for their release. The problem is that ransoming people is not an easy business. The prisoner can run away or die, his relatives might not have the money to pay up or, worse, they might simply refuse to reclaim the loved one. The shrewd Englishmen thought up a scheme to divide the French knights into shares, sell them “in parts,” and form what would now be called an “investment package” that could be sold to a third party. In contrast to the hapless financiers of the 21st century, Fastolf and Whittington not only got rich on the scheme but became famous as well. One was immortalized by the Shakespearean character of Sir John Falstaff, and the other became a hero of children’s fairy tales.

Invention and discovery in science and technology are not the fruits of cunning imagination or the results of attempts to cash in without long, painstaking effort and difficult work. They are the result of extended, focused, intelligent and collective effort. Society identifies a problem and searches for the solution. Eventually someone appears who surpasses everyone else thanks to his or her nonstandard approach. But innovative work is valuable precisely because it provides a solution to a very real and meaningful challenge earlier formulated by society.

By contrast, the principle of an innovative economy suggests an endless flow of answers to questions that don’t actually exist. Scores of improved or original ideas might demonstrate the limitless imaginations and mental adroitness of their authors, but they leave us, as before, face to face with our unresolved and collective problems. Unfortunately, technical gadgetry is no substitute for meaningful scientific breakthroughs, and private initiative cannot replace qualitative social change.

Only when society can collectively express its will through democratic processes and formulate the challenges that it faces will we see the appearance of something not only new but also necessary and useful.

Boris Kagarlitsky is director of the Institute of Globalization Studies.